Defense Will Likely Barely Top Inflation

Congress probably will limit next year’s increase in the defense budget to little more than the inflation rate, a top White House aide now acknowledges, despite President Reagan’s request for a boost in the Pentagon’s budget of nearly 12%.

“I think we’ll be very fortunate to see an increase . . . a real increase” above inflation, Mitchell E. Daniels Jr., Reagan’s top assistant for political and governmental affairs, told reporters Wednesday.

“Speaking only for myself,” Daniels admitted that the White House is likely to fall far short of its proposed $320.3-billion defense spending blueprint and conceded that the Reagan Administration should expect at best to win only slightly more than $300 billion in fiscal 1987, which begins Oct. 1.

Focus on Tax Hikes

Instead of talking much about spending priorities, the White House budget strategy this year will be to focus its efforts on resisting congressional pressure for a tax increase, Daniels said in two separate sessions with reporters. He suggested that the White House expects to put the Democrats on the political defensive during this year’s congressional elections by accusing them of ultimately intending to boost the taxes of American families.

“The opportunity this year is to remind people what the other side is saying,” Daniels said. A tax increase, he added, is “the issue of the year. That’s the one we want to keep the focus on.”

Although the White House will continue to press for higher defense spending, Daniels noted, the “choice this year . . . is between spending and taxing.” Holding the line on taxes, he suggested, is likely to take precedence over winning a big boost in the Pentagon’s budget.

The defense budget for the current fiscal year is estimated at approximately $284 billion, but Daniels argued that Congress would begin from the $292-billion level, in effect before automatic spending cuts that are scheduled to take effect on March 1 under the Gramm-Rudman budget-balancing law.

With an expected inflation rate of about 4%, this year’s $292-billion defense budget would have to grow to about $304 billion just to keep pace with inflation.

Control of Senate

The top political priority of the White House is to retain control of the Senate, where Republicans currently hold a 53-47 edge over Democrats, Daniels said. Of the 34 Senate seats up for election this fall, 22 are held by Republicans.

“It’s no secret we have our eye on the Senate,” Daniels said, arguing that a healthy economy this year and “public esteem for the President” will help Republicans overcome the odds against them winning enough elections to maintain the current balance of power in the Senate.

Daniels argued that California Sen. Alan Cranston, who is seeking his fourth term, “is the most vulnerable (Democratic) incumbent around.”

Citing recent evidence from a Los Angeles Times poll showing that Cranston had failed to garner a majority in straw polls against almost all of his largely unknown potential GOP opponents, Daniels contended that “he can be beaten by any of several people in the primary. A big vote (against Cranston) is available to almost anybody.”

Assessing the prospects for GOP senators seeking reelection, Daniels said that present estimates show “every Republican except (Paula) Hawkins (R-Fla.) ahead.”

White House to Benefit

The decision last Friday by a three-judge federal panel to eliminate the automatic spending cuts from the Gramm-Rudman law should benefit the White House in its budget wars with Congress this year, Daniels said.

Under the original approach, which was thrown out on constitutional grounds, congressional failure to agree on a budget that would lower the deficit close to the $144-billion target for fiscal 1987 would have triggered automatic spending cuts that would have hit defense and domestic spending equally. That would have left Reagan’s defense buildup vulnerable to a potentially devastating cutback far harsher than the limit Congress is likely to accept this year.

“There was a legitimate question about who the gun was pointed at--up until Friday,” Daniels said.

But with the Supreme Court believed likely to go along with the lower-court decision requiring Congress to vote on deficit-cutting measures only a few weeks before the election, Congress is faced with a “no-win situation,” Daniels said.

“I don’t really think Congress would vote for gutting defense and an arbitrary cut across all the good as well as bad programs,” he added. A lawmaker who “casts an affirmative vote” for that prescription, Daniels said, is going to face “a very difficult election.”